E-commerce technology enables shoppers to purchase items of merchandise such as autos and clothes and items of service such as travel and insurance on-line, from websites that act as virtual stores. Pioneers of e-commerce include Amazon.com, Inc. of Seattle, Wash., eBay Inc. of San Jose, Calif., Expedia.com of Bellevue, Wash. and Shop.com of Monterey, Calif. E-commerce technology combines on-line catalog ingest, browsing and search, inventory management, purchase and payment transactions, automated payment processing, and other components within a comprehensive e-commerce system.
The growth of the Internet as a medium for e-commerce has led to tremendous growth of product and service offerings. One example of this growth is the expansion from single merchant e-commerce websites that act as virtual stores, to multi-merchant e-commerce websites that act as virtual shopping malls. The multi-merchant e-commerce website provides a single integrated website where shoppers can purchase goods and services from a wide diversity of merchants. Multi-merchant e-commerce websites are able to incorporate features of single merchant websites, and have the potential of offering features beyond those offered on single merchant websites.
One increasingly popular feature of single merchant websites, which has proven to be a substantial source of revenue, is the commerce of online gift giving. One component of a gift giving system is a gift card. A gift giving system enables a gift giver to purchase a gift card for a specified amount of money at a merchant's website. The gift card is physically or electronically delivered to a recipient, referred to as a “gift card recipient,” designated by the gift giver. The gift card recipient can redeem the gift card for items of merchandise and/or services at the merchant's website. Typically, if his/her purchase amount is greater than the specified amount of the gift card, the gift card recipient pays the difference. If the purchase amount is less than the specified amount of the gift card, a balance remains on the gift card that can be used in the future.
Gift cards are typically based on a “closed loop” payment system in which the gift card recipient can only use or “redeem” the gift card at a single merchant's e-commerce website or store. In contrast, a credit card payment system constitutes an “open loop” payment system because a credit card can be used with many merchants, i.e. their use is not restricted to a single merchant or to a small number of merchants.
One drawback of a closed-loop gift card payment system is that a gift card recipient is limited to making product selections from a single merchant's e-commerce website and may not find sufficient items of interest. In this case a gift card may not be redeemed, or may be only partially redeemed, and yet the gift card giver was billed in full.
Implementing closed loop gift card payment systems on multi-merchant websites presents difficulties because each merchant requires a credit card or other form of payment. Thus, prior art multi-merchant payment systems required the gift card recipient to provide their own credit card at the time of purchase in order to pay the merchant whose merchandise and/or services the gift card recipient selected. For example, SHOP.COM, a provider of a multi-merchant e-commerce website, previously provided a gift card that required the gift card recipient to present a credit card with each purchase and the amount debited would later be credited or rebated to his/her credit card. This approach proved to not be attractive to shoppers.
Therefore it would be advantageous for a multi-merchant website to provide a payment system which acts as an open-loop payment system with respect to the gift card recipient allowing him/her to redeem the gift card from a large selection of merchants. Furthermore, it would be advantageous for a plurality of merchants' websites, including both multi-merchant and single merchant websites to provide a payment system which acts as a closed-loop payment system with respect to the gift card recipient by restricting the gift card recipient to make selections only from their websites.
Reward points programs, or loyalty programs, in which a consumer earns points for making purchases from or using the services provided by the company offering the reward points program, and can redeem these point for products or services at the company, are an example of a closed-loop payment system offered by many companies, including airlines, hotels and bookstores. Reward points programs are typically closed loop since the reward points can only be redeemed with the company offering the program. In contrast, the present invention enables a gift card giver to use reward points to purchase a gift card, thereby allowing a gift card recipient to select items of merchandise and/or services from a plurality of merchants. This effectively converts reward points programs into open-loop payment systems.